They spoke about this today at the agny actuarial career fair in new York. Experienced speakers said that it would create much more work for actuaries initially, but afterwards there is no way of knowing. It depends on how the laws are written. Personally, I think self driving cars will drastically change aspects of pnc insurance, but they'll always find a way to continue to profit

I'm a bit confused here. Lowering revenues does not necessarily mean lowering final profits. While the insurance company receives smaller premiums, they will also be expecting drastically smaller payouts as well (i.e. claim frequency). We could perhaps see company growth slowing down if they don't have enough hard capital to expand (with fewer dollars going in and out) but I don't think that means companies will see damage to their profits.

Unless we're suggesting that driveless cars would eliminate the need for insurance alltogether. While it might reduce the need for large policies, I doubt it would eliminate the need. Machines are not perfect and errors still happen. We insure all kinds of machines right now, with varying degrees of human error chance.

Of course, that statement could be true and is dependent on other factors. In this context, though, why would lower revenue not result in a proportionally lower profit? If we assume that for a particular policy the following holds true:

Premium - E[Loss] = E[Profit]

and this equation is true for every policy - then every person switching from a driven car to a driverless car will result in less profit. Unless you're saying that policies for driverless cars will be as profitable (or more) than they currently are?

Interesting thought but suppose when self driving cars are released, they include an option to manually drive them. Now how does the actuary figure out how likely you are to drive it as opposed to letting the car drive itself?

Also I believe that the self driving car will not be fully adopted. Many Americans love to drive their cars, as it's what our country was founded upon. Not to mention , many people cannot afford to go out and buy a new car just vecUse the technology improved.

Yeah, I don't think human drivers will ever be completely removed in the near future. Though I would imagine there would be a massive reduction of accidents in certain categories. Drink driving would be drastically reduced, as would driving while deprived of sleep. If these contribute significantly to payouts compared to other crashes (I have no idea if they do), it could drastically simplify models.

Considering all the variables the car would have to collect and record in order to drive itself, I would also speculate that actuaries will have access to much more data than before. Models might be a minefield until data starts coming in, but when it does, there could be some very interesting and detailed models.

The only thing that is going to be reduced is frequency. Severity will keep going up with inflation and costs. Insurers that will survive in next decade will be the one that are able to leverage their insurance system to reduce fixed costs per policy sold. Lot more consolidation will take place in a market like the US or Canada.

Best case scenario (from a P&C insurer perspective) is that laws regarding liability do not change but frequency drops. In such a scenario people will still be required to purchase auto insurance but the premiums will drop only at the insurers' discretion (i.e. from market pressures). Such a scenario would almost definitely result in increased profit in my opinion (I work in P&C pricing).

More likely, over time the legal environment will change as people begin to question why they still have to purchase insurance for the car when the manufacturer should be liable for any collision damage that occurs. If this happens, revenues will drop dramatically as personal auto insurance is a huge component of the industry.

Insuring these manufacturers on a commercial basis would be an interesting project as auto manufacturers would probably seek pricing that can be charged upfront on a per-vehicle sold basis in order to cover the cost of the insurance over the lifetime of the vehicle which is very uncertain, especially at first when the frequency and severity of such losses is very volatile.

I think current best guess is that it will end up as a product issue - which is to say, low frequency (things wont wrong often) ang high severity (but when they do they go wrong badly). There will be lots of lawsuits between software house, equipment suppliers, car manufacturers etc about who's actually at fault.